RBI forex rules described in October 2026 lower the threshold for foreign exchange derivatives without an established underlying exposure from $100 million to $5 million. The Reserve Bank of India’s measures also restrict rebooking cancelled contracts and require reserves for certain transactions.

Key Takeaways

  • The threshold for derivatives without established underlying exposure falls to $5 million from $100 million.
  • Authorised dealers must obtain user declarations and cannot rebook contracts already cancelled with any authorised dealer.
  • A separate reserve equal to 20% of the notional amount applies to specified contracts worth more than $2 million.

What the RBI forex rules change

The lower threshold affects foreign exchange derivative transactions undertaken without establishing an underlying exposure. The previous threshold was $100 million; the new threshold is $5 million.

Authorised dealers must not permit the rebooking of a foreign exchange derivative contract that has already been cancelled with any authorised dealer. The measures also require dealers to obtain a declaration from users that the underlying exposure has not been booked with another authorised dealer.

Reserve requirement for specified contracts

Authorised dealers must maintain a separate Forex Exposure Risk Reserve with the RBI equal to 20% of the notional amount for specified derivative contracts valued above $2 million. The available information does not detail all the contracts covered.

For banks and their customers, the requirement could affect the resources available for hedging transactions and their cost. The available information does not establish how much, if any, of that cost banks will pass on.

Timing and scope

The measures were described as recently announced, but the available information does not specify an effective date. It also does not detail how any restrictions on splitting transactions would apply to importers that hedge a genuine exposure in stages.

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